The Rollercoaster of Emotions on the Forex markets today
For those who read yesterdays post where I had missed out on a nice 55 pip profit on the EURUSD as my system had not identified the exit went to hit the stop target which meant a 28 pip loss overall is rather annoying. This actually means that your account, if you take a nominal starting account of 100 for example, was 155 if I had closed when I thought I should have closed to 72 after the stop was hit. You can see that this means that in fact, I lost an overall of 55 + 28 = 83 pips which is a lot!
Yesterdays post if you want to read it again is here: http://www.makemesomemoney.co.uk/2011/06/14/when-trading-is-the-most-frustrating-thing/
Now the rest of today was good… except that it could have got better. Part of it was some tension and annoyance of the 28 pip loss on the EURUSD which meant that my trading psychology wasn’t in the best state of mind… I was annoyed about losing so I want to take a profit and make it back.
The EURJPY was a great entry for me this morning, I caught it almost at the peak of the pullback as it was heading lower:
I closed the trade at 11547 for a respectable 41 pips. Looking back at the chart, there shouldn’t have been any reason why I should have closed the trade.. it was still going lower. In fact, if you look at it now, the market is at 11477 which means I’ve missed out on an extra 70 pips.. and quite frankly, it’s not a reason to close the short yet as it’s still looking to go lower still. At the time of closing I felt great to close at a profit but now I look back at it, I feel annoyed for closing early… grr!
The second trade was another good entry.. short AUDUSD at 10668. The market just fell away and I was actually not watching but when I did, I saw that the market had fallen so much and I was just seeing the start of a bounce so I closed out for 87 pips which was a decent amount. I know the market is 20 pips lower now but this trade I don’t feel so bad as you can expect a sizeable bounce after a relatively large fall like that:
The final trade today was short NZDJPY at 6652. Quite frankly, I close this right after I close the AUDUSD trade after seeing the bounce upwards and not looking at this chart. I got 26 pips on this trade and you can see that the market is now making a pullback upwards. I would expect it to fall at some point but you never know. I’m happy with the profit in hindsight for this trade but not pleased that I closed this in haste and didn’t do my homework properly.
Still, today was a profitable day with a total of 154 pips or 126 if you include the EURUSD losses earlier.
I was aware of all the emotions today when trading which can be an invaluable insight to the way you react to the markets. If you can identify behaviours which can be detrimental to your trading and fix them, you’re on your way to becoming a successful forex trader. It is very difficult however and a journey which has taken me numerous years to get to and then my journey is still far from over. People say that to be successful in trading is about mastering your emotions and reckon it can account for more than 80% of trading.
If you are interested more on trading psychology, I can recommend an excellent book by Steve Ward which identifies various strategies to help overcome the shortfalls us humans are born with when trading the financial markets:
